Is there such a thing as having too many credit cards? With so many cards offering enticing rewards and sign-up bonuses, you may be tempted to apply for one or two or more. But how many is overdoing it?
There isn’t a magic number of credit cards everyone should have. Having more credit overall can boost your credit score, which is important for getting loans, saving on insurance rates, and even getting a job. On the other hand, multiple cards can be debt traps if you don’t pay off your balance. Here’s what you need to know.
Your total number of cards doesn’t affect your score much
When the credit bureaus calculate your credit score, the number of credit cards you have is actually only a minor part of the equation. Only 10% of your FICO score is related to the type of credit you use, and only part of that is weighted by how many cards you have.
You could have one, two, or 22, but what’s more important to your credit score is whether you pay your bills on time and how little credit you use (also known as credit utilization)
How many cards do most people carry?
Americans own an average of two to three credit cards, according to The Motley Fool. In 2018, FICO found that people with high credit scores (800+) tended to have an average of three open cards. This could be because people with higher credit scores are able to open more credit cards, though. Credit card nerds that like to chase travel rewards are also likely to have many cards open at a time (though not as much as the record holder in the Guinness Book of World Records, who has 1,562 cards).
Generally speaking, your credit score won’t go down just because you have several cards. The exception is if you open and close a bunch of cards at once (aka “churning” cards) to maximize the rewards you earn from various cards. That can temporarily hurt your score: a new credit inquiry reduces your score by about five points for about six months.
More credit cards can help with credit utilization
The more credit you have but don’t use, the better it is for your credit score. Since every new credit card increases your total credit limit, you can decrease your debt-to-credit ratio (as long as you don’t add more debt). For example, if you owe $500 on one credit card with a $1,000 limit (50% utilization) and open a new credit card with a $4,000 limit, that would make your overall utilization 10% ($500 out of $5,000), which lenders like to see.
Of course, you can also ask your credit card company to increase your limit to $5,000, instead of getting a new card. This would also improve your credit score without the minor, temporary hit you’d take for opening a new account—plus you only have to manage one credit card.
A greater variety of cards could offer more benefits
Many people use credit cards not just for the convenience but for the rewards, too (although finance experts don’t agree on whether chasing rewards is worth the bother). You can use one card that has high cash-back reward for gas and groceries, for example, and a second one that rewards you with travel points when you dine out or travel, allowing you to maximize your rewards for every transaction.
Besides rewards, cards offer features like price protection, car rental insurance, free checked bags on airlines, travel insurance, and airport lounge access, which can be a compelling reason to open a new card, even if they have high annual fees.
Reasons why you shouldn’t get more cards
So far it seems like you should go ahead and apply for the additional cards, right? Well, there are some other aspects to consider.
While not permanent, your credit score still gets dinged
As mentioned above, applying for a new card can cause a temporary drop of a few credit score points, and it also affects your credit history, which tracks how long you’ve had credit accounts. Lenders like to see a long steady history of fiscal restraint, so they get nervous when you start loading up on new credit. If you’re going to be in the market for a major loan soon, and you want a good interest rate based on your credit score, lay off on new cards if you can help it.
More cards are a hassle to maintain
To prevent credit card companies from potentially closing your accounts due to inactivity, you’d need to regularly use each of your cards—when you have more than a few, that can get unwieldy. You don’t want your account closed, as the reduced credit limit and (potentially) reduced age of your credit history will impact your credit score.
More cards and higher credit limits could trick you into spending more
If you’re not careful, you could end up overspending, especially if you’re chasing rewards and trying to meet minimum spend requirements. Again, credit cards can be a gateway to debt problems if you aren’t diligently paying off your balance.
Bottom Line
If you’re responsible with your spending, pay your bills in full each month, and keep your balances low, additional cards won’t likely hurt, and could even help your credit. How many is right for you really depends on your comfort handling and managing them.
This post was originally published in 2014 and was updated on November 5, 2020 to reflect more current information.